MCX natural gas futures sparked above 14% last week that was the largest gains since September this year. The prices found support following the US gas prices jumped to a 23-month high on Friday on early forecasts for much colder weather in mid-January that could freeze oil and gas wells and lift spot prices by reducing output as in past years.
Also supporting prices was an increase in the amount of gas flowing to liquefied natural gas (LNG) export plants and forecasts for slightly cooler weather than previously expected that should boost heating demand next week.
Front-month gas futures NG1! for January delivery on the New York Mercantile Exchange rose 16.4 cents, or 4.6%, to settle at $3.748 per million British thermal units (mmBtu), their highest close since January 2023 for a second day in a row. MCX Natural Gas settled at 320.20 vs previous week close of 279.20.
With the front-month up about 16% over the past four days and in technically overbought territory for the first time since November, the premium of futures for January over February (NGF25-G25) climbed to a record high of 34 cents per mmBtu.
For the week, the contract was up about 14% after gaining 7% last week. Recent increases in gas prices coupled with a decline in oil CL1! prices, but the oil-to-gas ratio, or the level at which oil trades compared with gas, to 19-to-1 on Friday, the lowest since January 2023. On an energy equivalent basis, oil should only trade six times over gas.
So far in 2024, crude prices have traded about 34 times over gas. That compares with 30 times over gas in 2023 and 20 times over gas during the prior five years (2018-2022).
In other news, U.S. President-elect Donald Trump said the European Union, already the biggest buyer of U.S. energy, should step up U.S. oil and gas imports or face tariffs on the bloc’s exports.
SUPPLY AND DEMAND
LSEG reports U.S. Lower 48 gas output rose to 103.1 bcfd in December, up from 101.5 bcfd in November but below December 2023’s record of 105.3 bcfd. While warmer-than-normal weather persists until Jan. 4, gas demand is forecast to rise from 124.4 bcfd this week to 130.2 bcfd next week, then drop to 119.4 bcfd with milder weather. LNG export-related gas usage is set for its first annual decline in 2024 since exports began in 2016.
Technical Outlook – Natural Gas Futures
Natural gas prices surged above 320, marking the highest level since January 2023, and settled at 320.20, compared to the previous week’s close of 279.20.
As anticipated in last month’s bullish outlook, prices hit the predicted targets of 260-266, aligned with the Cup and Handle pattern.
The technical structure suggests continued bullish momentum. However, after the sharp rally, prices may consolidate around 312-305, potentially attracting buying interest. Expected upside targets are 330-339.
On the downside, a break below 290 could shift the trend, with prices likely retreating to 278-270.
Until then, Happy Trading!
Commodity Samachar Securities
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